Do High ESG make Firms Performing Better in exogenous crisis- Regression vs ML approaches in the Pandemic Period PAN, Weihwa, SHEN, Jialing
National Yunlin University of Science and Technology
Abstract
Recent exogenous shocks have not only increased the importance of corporate ^resilience^, but also brought ESG back to the forefront of the debate. However, there is no consensus in the literature on whether ESG can have a positive impact on corporate performance and the path of its mechanism. This study suggests that ESG can interfere with the relationship between corporate capabilities and performance to achieve better performance.
Using 719 listed and over-the-counter electronics firms in Taiwan as the study sample, this study investigates the effects of corporate ability, ESG, and their interactions on corporate performance (CAR) at the beginning of the 2020 outbreak through two different methods: event study method with OLS regression analysis, and machine learning, in order to understand the mechanism paths that affect the performance of high-ESG firms. The comparison of the two approaches is also made.
The empirical results show that operational and marketing capabilities have a positive effect on firm performance, while innovation capability has a non-significant or negative relationship. The interactions of ESG with operational and marketing capabilities have a positive effect on CAR, which shows that ESG can have an impact on firm performance by interacting with the capabilities of the firm. Machine learning methods can only produce meaningful results with some degree of manual intervention. Finally, this study confirms that high ESG firms have better performance in the early stage of the epidemic (CAR010) after additional research.
